5 Steps for Conducting an Effective Annual Review

It's that time of year for many of us. Here's how to lead an effective annual review that helps your employee grow.

This week at Zillow Group, we're kicking off annual reviews -- a time when employees sit down with their managers to receive feedback on the past year's performance and discuss the coming year's goals. Structured feedback within annual reviews is critical to our employees' career development; while employees ultimately own their careers, leaders and managers are responsible for helping them grow.

Here's what I've learned from my manager, Rich Barton, and our HR team about how to structure an annual review that helps employees get the feedback they need to develop in their careers:

1. Solicit feedback from the employee, direct reports and peers.

To get a comprehensive view of performance, you have to gather feedback from multiple sources, starting with the employee. After all, employees are the true owners of their careers, and it's important for them to reflect on their work. Have the employee write an evaluation of her own performance, including how she demonstrated company values the past year and how she can grow.

Then, solicit feedback from her direct reports and peers. Some of the most valuable feedback I've received in my career came from my direct reports.

For example, several direct reports recommended that I "level up" and delegate more responsibility to them. While I'd gotten similar feedback from my manager that I needed to delegate more and focus on bigger, long-term opportunities, the feedback really sank in when it came from my employees.

2. Focus on annual performance, and encourage discussion.

Once you've gathered the self-evaluation and the peer feedback, it's time to draft your own review of the employee's performance. It can be tempting to focus on recent results, but try to adopt a wide lens and reflect on the whole year. Your employee may have demonstrated a ton of growth, but if you fall victim to recency bias, you might miss an opportunity to celebrate and reinforce great work.

During the review itself, walk your employee through your observations and those of their peers and direct reports, which should take nearly an hour. Encourage the employee to ask questions and discuss along the way.

The back-and-forth can spark insight for you and your employee, so don't have a one-sided conversation. As a manager, pause a lot during the review to give your direct report a chance to react.

3. Don't confuse pay with feedback.

A lot of new managers make the mistake of kicking off the annual review by talking about compensation or stock options. That's problematic for a number of reasons. First, it derails the discussion, which should focus on your direct report's performance and career development.

Second, it assumes that your employee is motivated primarily by pay. But according to a study by PWC, Millennials actually care more about the opportunity for growth and progression than pay, and managers do their employees a disservice when they focus more on pay than development.

I've found that the most effective managers only discuss pay for the last 5-10 minutes of the annual review. If the direct report wants to dive into the compensation discussion further, suggest a separate follow-up meeting so you don't indirectly conflate pay with feedback.

4. Provide a clear path for growth for superstars on your team.

When you've got a top performer on your team, it can be incredibly challenging to identify ways for them to improve. That's when you really need to stretch yourself as a manager.

You may have a sense of where your direct report wants to land in her career; what steps or skills does she need to get there? If you're unsure, involve your employee in that discussion. Find out how she envisions her career path so you can set her up with the resources, connections and experiences to get there.

5. Remember, reviews go both ways.

Be sure to ask your direct report what you can do better as a manager. Some good questions here include "How do you feel about how you and I interact?" and "Are there ways that I could support you more as your manager?"

Annual reviews provide an opportunity for you to learn how to improve as a manager, too.

Feedback doesn't stop with an annual review.

Annual reviews are really important--and so is ongoing feedback. The reality is that most of us spend more time at work than with our families and friends.

When we're growing and learning at work, our careers can become a huge source of meaning and purpose. As leaders, it's our role to help each of our employees grow in their careers and chart their own course.